JACQUELINE DOWNES:
You talked about employers potentially having some, you know, there are issues around being able to prove misuse of confidential information. Obviously, employees do, you know, in many, not all, I accept that, but in many cases, have access to very sensitive information about trade secrets, about customers, that employers do trust them with, particularly one might say, in senior roles and executive roles. But also, sometimes in those personal services. We've heard a bit of talk of gardeners today. I've also heard about hairdressers being particularly subject to restraints of trade because of the personal connection that clients, that might be introduced by the employer, might have with hairdressers they employ.
You mentioned perhaps the individual business interest might not be the same as the economy’s, but I wonder what thought has been given to the impacts that might have on the economy, on the extent to which employers are prepared to trust employees as much with that information? Whether it would have any impact on hiring decisions, in terms of who you might or might not hire, if you thought that the employee might be quite free to move whether there's been any consideration of the economy wide impacts of that?
ANDREW LEIGH:
Well Jacqui, I think it's always tricky to know what the world would look like if we made a legal change. And probably the best evidence here comes from the US states which have made such a change, and in those environments, I don't see the problematic impacts that you might have worried about. If you look at the transition made in Hawaii, the changes that are being made in Spain or in Finland, these don't seem to be having the really problematic impacts on innovation and on firms investing in their employees. Certainly, from a theoretical standpoint, you might be concerned about that, we obviously want firms to be investing in workers and bringing them into the conversation about the IP that the employer holds. But in the case studies that I've observed, I'm not terribly troubled that we're going to see a lack of investment in workers if we were to go down the path of constraining the enforcement of non‑compete clauses.
QUESTION:
Hello, thank you for the speech, I can attest to many of the examples of the prevalence of non‑compete clauses for low paid workers in various industries. I know you mentioned some recent comments by Ian Ross, former President of the Fair Work Commission, now at the RBA, I note one of his comments was similar to what's happening in Spain, which is that adequate compensation should be paid during the period of the non‑compete clause. I was interested in your thoughts on whether that would be suitable for the Australian context? I know he's also mentioned about them being phased out through new enterprise agreements. But in our experience, many employees are just covered by modern awards and not PAs, so interested in your thoughts on that.
LEIGH:
And certainly, I think employers would regard non‑compete clauses differently if it was effectively a promise to pay a former employee, even after they’ve departed the business. Right now, including a non‑compete clause into an employment agreement is essentially costless on the employer side, a lot of these are standard form agreements, why wouldn't you put in a clause which makes it easier to hang on to your staff? It's only upside for an employer if you think that the employee isn't going to negotiate or demand a higher wage. So certainly, I’ve got a mountain of respect for Ian Ross and his thoughts there. That's one of the issues that we're really keen to hear people's feedback on. As to whether, sort of requiring some form of compensation might be a way of getting the market itself to curb the use of non‑compete clauses.
DOWNES:
So you mentioned in the US and some other places about, so Spain, or they're considering a complete ban on non‑compete clauses, do you think that a complete ban would be sort of a similarly blunt instrument to the use of the non‑competes, and that perhaps a more nuanced approach might be needed in Australia to continue to encourage innovation and investment? Perhaps particularly for high paid workers? Executives? Is the government thinking about a complete ban or perhaps a more nuanced approach?
LEIGH:
Thanks, Jacqui. And initially, I was quite attracted to the idea of some sort of an income threshold, because I'm yet to meet anyone, frankly, that defends the use of non‑compete clauses for early childhood workers. But the argument against that comes if you think non‑competes aren’t just dampening wage growth for low‑paid workers, but that they're also hampering innovation in the economy. So, I think about somebody I know who left one of Australia's major banks to set up a competing FinTech company, and who as a result of a non‑compete clause had to take a six‑month break before beginning starting up that FinTech. Now if that FinTech has a big positive impact on the Australian economy, then we're effectively getting that financial innovation six months later than we would have otherwise gotten it.
So, if your biggest concern is productivity growth, then plausibly, the biggest damage could be done by constraining high wage workers from moving, particularly in innovative sectors of the economy. So, we need to think through what the ramifications are. What is fantastic about this discussion is that it's so heavily data informed. e61 stepped out and did the employee survey last year, David Gruen got the ABS to include the employer survey. And when I was crunching empirical data, to be able to touch ABS micro data would typically take you a couple of years, but the competition Task Force are now on the cusp of being able to work directly with phase data, to get to exactly these questions. We're talking about to find out what the impacts are productivity. So, it's not just a theoretical discussion, it's an empirical one, and we can make a data informed decision.
QUESTION:
Thanks very much for the talk Minister. I notice in the issues paper that you've got, Treasury has got a section on casual workers and gig economy workers, and I’m curious about your views about the reasonableness of non‑compete clauses for workers that aren’t engaged full time?
LEIGH:
Thanks. And you certainly see in practice a lot of gig workers wanting to work multiple platforms. The classic is somebody who wants to work as both an Uber and a Lyft driver, and to move between those platforms. And in an environment in which people feel that a single job doesn't make ends meet, constraining them from working multiple jobs is hard.
I've heard anecdotes of a worker who was at both Hungry Jack's and McDonald's and was told by their employer at one of those outlets, that they couldn't continue working at the other because it just wasn't appropriate to have someone at two fast food restaurants. I don't know whether they think that employee is somehow stealing the secret sauce and taking it over to the other fast food outlet, but it strikes me as pretty unreasonable. And the e61 survey found that there was much higher prevalence of non‑compete clauses being used in the gig economy sector, I think partly because the employment agreements being used in those sectors are so heavily weighted towards employers, who've thought through, at every step, how they can get the most advantageous employment agreement. And let's face it, if you're working with Uber, you are not going to renegotiate your employment agreement. You're going to either take it, it's going to be on a take it or leave it basis. And so, in that environment, non‑compete clauses would be more likely to be Incorporated.
QUESTION:
There’s a term I would urge you to use as you talk about this, because I was struck by the stories, which is ‘bullying’. The inclusion of non‑enforceable clauses seems really transparently obviously a bad thing. And I can't imagine anyone standing up for it under any conditions ever.
You know: I'm an employee. My boss has got a legal department. The fact that the legal department wrote these things in a contract leads me to kind of naturally guess it's probably legal. As a result, I don't bother looking at Hungry Jack's for a job when I'm at McDonald's.
A very simple thing here would be some sort of bounty, which is you know, every time an employer includes a non‑enforceable clause in a contract, they’re up for a $1,000 fine. Let the class action lawyers go and collect as many of these things as they can. This seems like, on its face, just literally, I mean, the fact that it's unenforceable means it's not something they’re meant to be doing, and they're doing it through sort of moral suasion, rather than any serious contractual form.
LEIGH:
Thanks. And this certainly came up in the context of unfair contract terms between large and small businesses. The former government banned unfair contract terms, but they continued to crop up, for example in a context where a small business is supplying to a large supermarket. So, we made unfair contract terms illegal, which meant that the large businesses then had an incentive to think hard, am I including an unfair contract term? Such as a term which allowed one party to unilaterally renegotiate the price. And if they were, then they were up for a fine, and so those unfair contract terms came out. And your question goes to a broader issue of framing, which is that one way of framing this debate is one of freedom. We've got here in the room Trent Zimmerman, who I think in his political career was as strong an advocate for freedom as anyone’s been in the federal parliament, and for whom I think the value of freedom is probably one of the animating reasons that got you into politics. You can think about this as being an issue of freedom for employees – to go where they want to go, and to sell their labour to whoever they want. And to go out on their own and start a business if they want to. I’m a Labor person arguing this from an egalitarian side, but it's quite easy to see how you might couch an argument against non competes from a freedom and liberty standpoint.